Forget Oil Stocks … Banks are Getting Battered Now

You’ve probably heard the refrain on CNBC, or read it in the mainstream business press: It’s all about oil.

I’m here to tell you that’s a bunch of bull. The carnage in the credit markets started spreading well beyond the oil and gas sector last year, and now the same thing is happening in equities. One sector I follow the closest is really getting battered now — banks.

You can see that KRE knifed through an uptrend line that dated back to 2011. Then it took out horizontal support this week. That means every penny of gains bank investors racked up since the summer of 2013 has now gone out the window.

What’s going on? A couple of things …

First up are collapsing interest-rate spreads. Many investors thought the difference between short-term interest rates and long-term rates would increase in late 2015 and 2016. That helps support bank income by making the core business of deposit-taking and lending more profitable.

But instead, rate spreads are collapsing amid increased concern over deflation and economic weakness. For example, the crucial 2-10 Treasury yield spread just collapsed to its lowest since 2007. That’s putting pressure on industry-wide profit margins.

Second are worries about rising credit losses. If corporate borrowers can’t pay back their loans and credit lines, particularly in the energy sector, it’s going to take a major chunk out of bank profits. JPMorgan Chase (JPM) just added to its loan-loss reserves for the first time since the end of the last credit crisis, and other banks are following suit.

The financial sector is feeling the heat now.

But it’s not just energy. The major bank regulatory agencies warned in December that banks were overly exposed to aggressive commercial real estate lending. I’m very concerned about overly aggressive auto lending as well.

It’s also worth pointing out that shares of the major mortgage insurers are collapsing. To just give you one example, Radian Group (RDN) has lost roughly half its value since last summer. It’s now trading for the lowest in 34 months. Could investors be anticipating more problems in the housing market going forward, perhaps because of a weakening domestic economy? You bet.

So what does this mean for stocks? Well, the deterioration in credit markets last year foretold the equity turmoil this year. It was a key reason I told my subscribers last spring and summer to pare their stockholdings dramatically, raise a large amount of cash, and hedge against — or target gains from — deterioration in vulnerable companies.

Going forward in 2016, I don’t see how the broader market can mount a lasting rally unless and until financials stabilize. That’s because the financials are the glue that holds the capital markets (and the economy) together.

Just consider: Banks have already started tightening credit standards on new loans because of worries about old loans going bad. That’s starting to choke off the flow of credit to the economy, and it’s only going to get worse if delinquencies and defaults jump.

Credit-reliant sectors like autos, housing, and commercial real estate are particularly vulnerable. That’s because activity in those industries was turbocharged by excessively cheap and easy money over the past few years.

In other words, keep an eye on ETFs like KRE — and the health of the underlying banking sector. I believe they hold the key to the broader markets.

So what do you think about the action in bank stocks, and what it may or may not signal? Is the meltdown in regional banks a big concern for the S&P 500 overall? Or do you think that some soothing words from central bankers might be able to stem the declines? Are defaults a major concern outside of the energy sector? Share your views online when you get a minute.

Our Readers Speak

Yesterday’s column about what the richest of the rich are doing with their money prompted quite a few comments at the Money and Markets website.

Reader Ted F. weighed in on the absurdity of paying so much money for various toys and trinkets: “I’m beginning to think that a great many people have no concept of what money is and what things should really be worth. Tens of millions for a car? Can anything really be that rare or ‘collectible’?

“Can you imagine the cost to insure that thing? Wouldn’t you be too scared to drive it? What would someone do with it? Park it in their living room? Does somebody want to be buried in it?”

Reader Gordon said the squirreling away of money in assets is a sign of fear about what’s to come: “It shows a trend where the moneyed people are running scared, afraid their paper wealth will evaporate. They are trying to be first out of the starting gate or out the door of a burning house before it collapses. They gained their wealth by being smart, not stupid.”

As for whether the wealthy are right to get out of the markets, Reader Robert C. said: “We are in for a deflationary period. As you said, there is a total disconnect from the stock market and the real economy. I believe that this so-called recovery was fake.

“The way to grow an economy is by creating real wealth by increasing productivity. This comes from the creation of new businesses, low taxes and regulation. Our economic problems are structural, not cyclical. We and the rest of the world are floating with too much debt.”

Reader 151 picked up on that thread, saying: “I think your intuition is right. There is nothing now that the Fed bankers can do. Interest rate manipulation and more cash, while we hover just above zero, will not influence anyone for more than a day or two.

“The bottom line problem for the Fed is that everyone is getting jaded to their machinations. Their supposed power is now being seen as nothing but empty rhetoric. The problems are just too big.”

Finally, Reader Ronald B. said: “We are in the first stages of a bear market. The overall trend is down for the next 12 to 18 months. The velocity of money is at record lows, and printing more seems to only add to bank reserves, never going to public coffers.

“Most consumers are fully satiated in goods and supplies, including corporate investment goods for mining, agriculture and transportation. Like 1932, we see every stimulus effort just pushing on strings that buckle but don’t deliver! These conditions offer little upside. All we can do is wait, hold our cash, and seek out bargain stocks.”

Thank you for the feedback. I have no doubt that policymakers will keep trying to fight the deflationary/contractionary economic forces at work in the markets. But over the last several months, investors have stopped playing along because they can see that futility of those efforts.

They know that more QE, negative interest rates, programs to stimulate lending, etc. don’t work. So they’re using central banker-driven rallies to sell and/or re-load short/inverse ETF/put-option positions before the next leg down. That’s the polar opposite from how they used to buy into CB rallies between 2009 and early 2015.

I believe that approach makes all the sense in the world, by the way. It’s one I’m using to deliver profit opportunities to subscribers in my premium service. In the meantime, keep those comments coming in the discussion section below.

Chinese stocks tanked overnight, with the Shanghai Composite Index falling more than 6% to a 13-month low of 2,749. Several industry groups lost ground, helped along by reports that capital outflows jumped in December. That pushed outflows to an estimated $1 trillion in 2015, a record high.

Vague chatter about non-OPEC and OPEC countries working together to cut oil production kept the overnight trading session from being a bloodbath for U.S. stock futures. But that still seems to be pie-in-the-sky talk, given the fact the Saudis aren’t playing along.

What’s more, U.S. production isn’t under the purview of government officials like production overseas. So OPEC is reluctant to cut its own production in a move that would just cede market share to U.S. shale oil producers.

The financial conglomerate American International Group (AIG) attempted to placate dissident shareholders like Carl Icahn by announcing restructuring plans. It plans to sell its broker-dealer network, attempt to IPO its mortgage insurance business, re-organize into nine business units, and cut more costs. But considering the pressure on financials — and the fact mortgage insurance stocks are collapsing — that plan could be tough to execute.

President Obama is pushing for changes to retirement plans. He wants to offer tax credits to small businesses that auto-enroll workers in 401(k)s and to allow multiple businesses to pool their plans in an effort to bring down costs. We’ll have to see if Congress acts on the suggestions in the months ahead.

What do you think of the latest carnage in China? How about the talk of foreign oil production cuts — realistic or not? Do you think expanded 401(k) availability would help solve America’s savings crisis? Let me know in the comment section.

Until next time,

Mike Larson

Recommended Articles by Mike Larson:

Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.

{60 comments }

ianTuesday, January 26, 2016 at 4:47 pm

The hole is getting bigger lads

Micheal M.KloianTuesday, January 26, 2016 at 5:04 pm

I would like know why all the Congressman and Presidents ,since I can remember,have the ecomical obligation to Mortgage the Debt and by paying both interest and principal .I do not consider having a Balanced Budget the equivalent. It seems to me that they never intend ” to pay it off” .
Does not make economic sense to me.Please don’t respond by diverting that point.
What makes sense to me is that the concept of “Stimulation in the end does not Work” .As
Margaret Thacher said ” you eventually run out of other people’s money”.We have been there a long time .Just look at the Companies moving some or all of their operations to other Countries.

HowardTuesday, January 26, 2016 at 5:20 pm

Left leaning progressives around the globe have viewed economies differently. Think of it as a pie. Progressives want to recast the division of the pie in a way they perceive to be more fair and equitable. Others among us would say, what if we made the pie bigger and then everyone’s share would grow accordingly. Many western nations are caught in a trap with progressives trying to recast equality ‘spend other peoples money’ instead of us finding a common cause to grow wealth across the whole economy. Large scale capital investment won’t return or take place unless conditions of stability, profitability and favourability return. We also need to get rid of excessive bureaucracy and red tape.

GordonTuesday, January 26, 2016 at 11:55 pm

Hey Howard
Your idea will come to fruitation in future with the rise of the robots. Big business and industry will not have to share their profits with the mechanical workers. This will be the second wave of giving workers the boot after off shoring. Then the worker has no income to buy all the fantastic products the robots are building. You know the human “consumer” that everybody raves about to keep the economy afloat. Maybe its time to get into the oil and grease business as that appears to be all that will be in demand in the future. Mankind may yet make a comeback as AI continues to evolve. Positions could easily reverse and the mechanical masters could be in charge. Making whips could become a booming industry.

HowardWednesday, January 27, 2016 at 1:37 am

Gordon

Did you even read what I posted

Bob SchubringTuesday, January 26, 2016 at 5:45 pm

Micheal, the problem is that money is an idea. When we reckon a trade in money, we’re trying to apply mathematics, to count a thing that nobody can actually see or measure.

We’re measuring how satisfied people are, with the possessions they have at the moment. People trade with money, in an effort to express how important or unimportant, each thing they possess, IS, to them, RIGHT NOW. When circumstances change, so do our opinion of what’s important and what’s not. The retiree who loves golf, readily pays money to partake in the sport he loves. When the same retiree gets bone cancer and has to have a leg amputated, he can never golf again and he sells his clubs to someone who wants them.

The simple fact is, that our values change, as our needs change. So the price we’re willing to pay today, is not what we’d want to pay, in the future.

Understanding that fact is critical to understanding why money changes in value. It changes in value, because people’s values constantly change.

The basic problem with the National Debt, is that no politician ever wants to pay it off. It is a fraud, a falsehood, plain and simple. Politicians buy our votes by promising to steal things from some people and give them to others, hoping that people are dishonest enough to think this is a good thing. The US National Debt, is the sum total of every granule of food a politician ever promised to steal from one person by borrowing and not returning it, then promising to give to another person and never delivering it, whilst it spoiled and became too rotten to eat or use.

All the furious activity of moving the rotting food back and forth, creates the appearance that something productive is happening.

And all that’s actually happening, is that the food people grew for themselves, got taken away and allowed to rot.

Nobody ate it.

That’s the National Debt. It’s pure fraud and waste.

Federal Reserve Notes are financial derivatives secured by the National Debt. They seem to have value, presently, because if I don’t acquire enough of them to pay my tax bill I will get punished by some men with badges and very scary-looking machine guns. As long as there are revenue agents working to collect our taxes, demanding Federal Reserve Notes or offering a terrible punishment for non-delivery, Americans will continue to use the bloody things in trade. Whenever that stops happening, Federal Reserve Notes will have no other value.

If anybody has a better idea for building a monetary system, we’d better listen, because the current system is pretty much worthless.

KKTuesday, January 26, 2016 at 8:40 pm

Money as a idea, perhaps, although I think a unit of time would be more of what money really is that we exchange. Since for x I will trade/exchange x a amount that we agree upon, supply vs. demand.

George KuehnlTuesday, January 26, 2016 at 11:37 pm

Bob Schubring is the first person that has pointed to the cause and not just one of the problems it creates. Good job wise man!! The Fed a private corporation has brought the world to its knees. Congress should print actual US dollars and back them with the assets of this country. It is what the Constitution instructs us to do. Tell the Fed to pound sand. It would take a few years to recuperate but this country would be all ours the PEOPLES and not just a few corporate owners. What actually does the Fed have that would back up it paper money but electronic data. Nothing of any solid asset. Look around in America all you see is assets. Look around third world countries you see dried up useless land. So who is the wealthiest? The People of America not the Fed they have a few buildings, large egos and large balls.

JimTuesday, January 26, 2016 at 11:52 pm

It was with much forethought that the Founding Fathers mandated in The Constitution that only Congress would have the power to issue gold and silver coin. They tried paper and it was a dismal failure. It wasn’t worth a “Continental”. Paper money has always been susceptible to manipulation, as we are finding out the hard way. Jim

GordonWednesday, January 27, 2016 at 12:01 am

Yes your right about Federal Reserve Notes. Kennedy tried to buck the system and change to United States currency. Look what happened to him. I think this example has stuck in the minds of all politicians and its a no go place. All this talk of auditing the Fed will go no where just smoke and mirrors. Mr Rand and a couple others should watch their step and not over step the boundries laid out decades age at Jekyll Island. It could be dangerous for their health as well. For the sake of disclosure I think The Fed should be thoroughly audited and held more accountable not given the carte blanche freedom they now enjoy.

HowardTuesday, January 26, 2016 at 5:06 pm

Hi Mike

Some time ago you questioned the fear index in relation to the decline in markets. Another consideration is to look at graphs as to how far certain stocks have retraced their perceived value, past and beyond the last recession. This helps me find opportunity, pending weakness and further risk in stocks going forward. Banks that have lent into near zero interest rates are another example of over exposure to risk. This is certainly a choppy broader market going forward, as the unravelling of positions in exposure and risk are unwound.

GordonWednesday, January 27, 2016 at 12:08 am

Banks are pulling in their horns on easy lending. Losses are building up. Some loan insurance companies are going under or on the ropes. Banks are now coming under pressure in the markets as Christmas is over and the hangover is here. If the banks pull out the rug entirely from easy lending as they work under the POA idea things could get ugly fast. Banks do not care about the economy only making a buck. They are like the street corner hucksters. When the police blow their whistle they will pack up their cheap suitcases collapse the folding tables and run.

GordonWednesday, January 27, 2016 at 12:08 am

Banks are pulling in their horns on easy lending. Losses are building up. Some loan insurance companies are going under or on the ropes. Banks are now coming under pressure in the markets as Christmas is over and the hangover is here. If the banks pull out the rug entirely from easy lending as they work under the POA idea things could get ugly fast. Banks do not care about the economy only making a buck. They are like the street corner hucksters. When the police blow their whistle they will pack up their cheap suitcases collapse the folding tables and run.

GordonWednesday, January 27, 2016 at 12:08 am

Banks are pulling in their horns on easy lending. Losses are building up. Some loan insurance companies are going under or on the ropes. Banks are now coming under pressure in the markets as Christmas is over and the hangover is here. If the banks pull out the rug entirely from easy lending as they work under the POA idea things could get ugly fast. Banks do not care about the economy only making a buck. They are like the street corner hucksters. When the police blow their whistle they will pack up their cheap suitcases collapse the folding tables and run.

EdTuesday, January 26, 2016 at 5:09 pm

Judgment has started one of Many to come , from heaven , and prophecies say we will be destroyed in ONE HOUR
Revelations 18
pray for America the beautiful to RETURN to GOD and for forgiveness from GOD
have a blessed new year 2016

$1,000 goldTuesday, January 26, 2016 at 5:20 pm

so far, no bankruptcies in shale oil. what gives there?

HowardTuesday, January 26, 2016 at 5:27 pm

It is just possible that before undertaking risk and market exposure that the bigger players in shale oil considered market reaction to their entry. What is taking place now was foreseen by some as the cost to engage in the first place. The Fed can play a part in if and how fast things unravel.

HowardTuesday, January 26, 2016 at 8:32 pm

I should have added the three different kinds of risk, large organisations consider when entering a market –
1. Investment Risk
2. Market Risk and
3. Holding Risk.

It is the Fed who will decide how this unravels. They stuffed it up from the beginning.

JLTuesday, January 26, 2016 at 5:54 pm

Bankruptcies and consolidations are coming soon for the smaller players,no way around it…..

JLTuesday, January 26, 2016 at 5:57 pm

in the energy sector,that is!

$1,000 goldTuesday, January 26, 2016 at 7:31 pm

i doubt we see any bankruptcies. the banks will keep the assets for themselves.

GordonWednesday, January 27, 2016 at 12:14 am

$1,000 gold
A lot of shale companies sold future options on their oil at higher prices and now these options are expiring and they will have to sell into the daily market at a much lower price. Shale companies have made some progress at reducing costs but this could be the year when they come up empty if the oil market stays low. Their wells are short duration wells 2 years tops and they must keep exploring to stay viable. They keep pumping selling at a loss to stay afloat which works for a while but 2016 will be the year of reckoning for a lot of them. If all these fracker energy loans/bonds start going sour well get your popcorn and pick your seat the movie starts this year sometime.

$1,000 goldWednesday, January 27, 2016 at 9:11 am

no doubt the frackers will stop pumping, and the wells are full of assets that will revert to the banks. the fed is not going to let the banks fail. this could work out well for the bankers and the american economy as oil supply will remain adaquate for years to come.

MurrayWednesday, January 27, 2016 at 9:02 am

I just read there were 36 bankruptcies in 2015 of Exploration & Production oil companies. That was at $40-30 per barrel of crude oil. I wonder how they will do at $30 per barrel in 2016?

Loy AllenTuesday, January 26, 2016 at 5:25 pm

Should u sale your stocks or hold and look for good value stocks

GordonWednesday, January 27, 2016 at 12:16 am

Loy
If you find any good value in this market give us a shout. Amazon seems like a real winner but at lower prices to rich for my blood.

Chuck BurtonTuesday, January 26, 2016 at 5:26 pm

David Stockman, President Reagan’s former Budget Director, points out a belief, elsewhere, that the world economy is going to begin to shrink, for the first time since the 1930s. He says there is just “too much wealth out there”. He blames it on central banks creation of money literally pulling demand from the future, until there are just too many “things” – too many gadgets, too many autos, too many big houses, too many skyscrapers in China. He might have mentioned too much debt, and now society has to begin paying the bill. Either debt must be repaid, or essentially repudiated in bankruptcy for individuals, or in nations basically saying, fugeddaboudit. Nations do have that power, after all, at least with their citizens. Somehow, the politicians seldom come out on the small end.

GordonWednesday, January 27, 2016 at 12:18 am

Chuck your my boy. Right on the money as usual.

JoeTuesday, January 26, 2016 at 5:27 pm

Unfortunately banks and the government have trained people to confuse credit with money.
When people get a new credit line they feel good, they spend it like money, same as our government does, only difference is, Washingon prints it, people may have to pay it back.

But eventually it will come to an end.

The amazing thing is that the Financial TV channels never caught on to it, and blame everything on Oil and China…..The real mess is just in the beginning stages.

GordonWednesday, January 27, 2016 at 12:20 am

Joe your the man to. You and Chuck would make a great team. My generation knew the value of money and the ills of credit. Yes we are sadly just in the beginning stages.

BrianTuesday, January 26, 2016 at 5:31 pm

I agree with Mike’s story about the Banks, but that’s not the whole picture.
I believe that part of it is the sentiment against it being fostered by politicians such as Bernie Sanders, who need a whipping boy in order to advance their agenda; and that vitriol is giving the banks a negative sentiment until it lightens up after the elections…
We’ve seen it before from Obama, who once famously said to Dimon & Co., “I’m the only one between you (bankers) and the pitchforks (disgruntled americans).”.

GordonWednesday, January 27, 2016 at 12:25 am

Brian
I am sure that comment did not phase Jamie a bit. Americans are slow to reach for the pitchfork. They are almost to scared to fight. They have circled the wagons and its not Indians they fear. It is big business and politicians. Politicians no longer work in the shadows they are out there in the open now herding us like cattle. They seem to sense we have lost the will to fight.

FreddyTuesday, January 26, 2016 at 5:34 pm

Well done , Mike :
I am delighted that the banks are finally getting to taste the same type of let down as the big oil co.’s experienced over the last 6-8 months…..these guys have had their own way of making money galore …..remember the time when most Banks were happy with a few million bucks in profit ….oh no, now they made several billion in a quarter , all by the so called generosity of the our honest & hardworking citizens …..and the excuse that our shareholders are the reason is so much bunk ….even a 5th grader in school can see the difference and the real reasons behind all this nonsense.
Normalcy is gone out the window & the almighty buck is motivating everybody’s insanity and our debt is piling higher & higher …..even everyone’s grandchildren will be able to pay off the outrageous debt we have accumulated in a very brief time!!
Hurrah, long love the buck and very soon the whole financial system, worldwide will end up in abyss we will never come out from !!

F.K.

Jethro BodineTuesday, January 26, 2016 at 5:41 pm

Have no fear, Larry Edelson is here. The Dow to 31,000 by 2017!

ThomasTuesday, January 26, 2016 at 5:41 pm

Hi Mike,
I do not wish to sound “conspiratorial”, but I think it will pay us handsomely to see what new plans the Banking cartel come up with in the next three months. Looking at them and what they do is like having another market indicator! The Market Makers are having a field day with this volatility -bull today, -bear tomorrow! I say short the banks and go long on gold! Soon we will see fiat currency jumping on the block-chain technology bandwagon, with the Fed and Central Banks on the sideline! It is a sure way to see M3 money supply getting back into the economy, without which there can be now real growth! Let us watch this “cartel” indicator closely!!!

Ted FTuesday, January 26, 2016 at 5:41 pm

Banks have always had problems with lenders not being able to pay loans. During the 1880’s grain sold from here to Europe was a ratio of so many bushels to an ounce of gold, the ratio remained fairly stable for years on end. What changed was the value of gold itself. There was an attempt to corner the gold market and push the price down, which forced the value of wheat down. At one point it cost more to harvest and ship the wheat than it was worth in the exchange. So to break it the several railroad tycoons who were watching their profits disappear bought futures in the market and demanded the gold be delivered. And as the tycoons bought and hoarded gold the manipulators couldn’t buy gold at any price. The price went back up and the grain started moving. To support the banks the railroaders had to deposit the profits in the banks. Similar happened in the 1930’s with the farm failures and margin buying of stocks. But now the farmers are off the hook and it is the oil producers. It is always somebody. With record sales in the auto industry this year, what does the next year or two hold? And what about the marginal buyers who suddenly can’t make the payments? General Motors went down not because of its cars buts its mortgage company, number two behind Countrywide, in the housing bust.

H. Craig BradleyTuesday, January 26, 2016 at 5:52 pm

MISINTERPRETATION ?

Many urban markets have been the beneficiaries of foreign buyers who pay cash for a house. Capital flows from Asia ( China ) into select real estate markets are still driving the price of a house higher still in Southern California. Traditional loans from banks have not been the driver of housing demand from buyers for a number of years.

So, if banks tighten-up on home loans and lend less, it may not be that influential to the local housing market. However, another Yuan devaluation may just cause some foreign demand to slow and take away a major support for strong (cash) buyer demand. In coastal markets, bank loans have not been the force behind the recovery in housing and neither has the local economy.

Household wages and income have been flat since 2007 in most markets. Half of all state residents rent rather than own their home. Until home prices come down significantly, the interest rates or bank loan volume won’t change anything. Housing is still way too expensive for new buyers in many (prime) locations.

Banks are obsolete for funding many small or medium-sized businesses too. In addition, Business Development Corporations ( BDC’s) have usurped much of the role once played by bankers. P 2 P loans on the internet have also replaced some of the roles formerly played by traditional banks. Regional and local banks are under many regulatory constraints. I feel there will be even fewer of them survive each successive recession or tightening cycle. I think that is the plan and intended regulatory result. As far as credit unions go, 4% of all credit unions completely disappear EVERY YEAR !!!

bob s.Tuesday, January 26, 2016 at 6:29 pm

how about us calling russia crooked these demcrats cant even look at them selves this whole world problem from start to finish is greed people must change and open there mouths to stop the foolishness this country is doing. a soceity cannot survive with the morals that this country portrays. stand for whats right and nothing else

$1,000 goldTuesday, January 26, 2016 at 7:33 pm

ya, right. chicago has more corruption than all of russia put together.

JimTuesday, January 26, 2016 at 11:58 pm

It all goes back to money. An honest currency begets an honest society and visa versa. Jim

Chuck BurtonWednesday, January 27, 2016 at 2:07 pm

Correct, as usual. That may have something to do with this country having a larger number of people in prison than even China, with three times the population.

IvanoTuesday, January 26, 2016 at 7:20 pm

They claim that 40% of the U.S.A. economy is the Government. So, the economy will never crash, since the Government will never go out of business. If we had an effective method of knowing exactly what actions “big money” is taking… I would say they are “again” making suckers out of retail investors. Those who are now losing sleep over another engineered market adjustment. The big boys always win. The little retail investors sometimes win, but not very often in the market. What do you people expect? The FED to lower interest rates. To what minus 10%. Greenspan and Bernanke quit just in time, and are now both multi millionaires. Ain’t that nice.

Al McNalTuesday, January 26, 2016 at 7:58 pm

I think you nailed it in this article Mike. Debt is the problem which no one has been willing to face since 2000, period. It’s the reason we had huge growth in oil i.e. cheap money. But now all this cheap money has created too much capacity globally hence the commodity crisis. Plus the world is mired in debt so deep every central banker has tried to figure out how to avoid facing the problem i.e. they are offering more debt.

At some point in this foolish game of I can’t see the elephant in this room society, probably starting with bankers, someone will open their eyes.

PatTuesday, January 26, 2016 at 8:40 pm

With so much infrastructure that needs to be done in our country, what stock, EFT with a good Weiss rating, would you suggest to consider?

DayneTuesday, January 26, 2016 at 9:04 pm

We are in process of economic Armageddon . No banker has a solution and the politicians have no clue and the Fed and Central banks are powerless..
Get a garden grow your own stuff and become self sufficient and watch Rome burn.
Say your prayers and live right. You all know the story about the foolish virgins. Don’t be one of them and get caught with your pants down.

GeorgeTuesday, January 26, 2016 at 9:13 pm

For nine years the government has thrown money at the problem and done nothing to increase demand to the small business. we would get about 1to 2 % growth from just repairing every thing with out government If they sent every tax payer $10,000 we would be flying now. my thought what do you think.

CraigTuesday, January 26, 2016 at 9:36 pm

I think you guys are missing the mark. A great deal of the economic woes are due to what I call “capital concentration.” The gap between rich and poor around the world has reached a crisis point. What we really need is more transfer of wealth from the people who hoard cash (the rich) to the people who spend it (the poor). Just as the cash for clunkers jump started the economy back in 2009, transferring cash from the rich to the proletariat for the purpose of purchasing specific items, say housing for example, would be the pilot lite that would ignite the whole economy. The banks would be saved and we would be hunky dorry until the next bubble burst.

Al McNalThursday, January 28, 2016 at 12:03 pm

dream on Craig.

davidTuesday, January 26, 2016 at 9:40 pm

Bring back energy and bring back recovery. Russua is already telling OPEC they make more selling one barrel for $50 than two for $30 each. Go figure?

jeffTuesday, January 26, 2016 at 10:06 pm

Hi Mike,
I read all your article, you talk about the Stock, Energy, Bank ….
I really want to see you write an article on the BOND Market in 2016 .
Usually stock goes down bond goes up , will it be different this time ,
Stock and Bond go down together with all those defaults ?

JimTuesday, January 26, 2016 at 10:52 pm

Many of the shale players were hedged at $70-80 a barrel. Those are expiring right and left. The you know what will hit the fan this year in the energy sector. The big ones like EOG, Pioneer, and Continental will make it, but many of the juniors won’t. Jim

SharWednesday, January 27, 2016 at 12:22 am

I’ve been warning about the large number of bank loans out on oil related companies since August and written about it extensively on Seeking Alpha. Many have argued the point especially analysts, brokers with a few sending rebuttal reports, graphs and statistics which only confirmed my deepest concerns. One even sent a full report reflecting how much overall stake each individual bank had played in energy loans which only exposed the reality this could have as big of an impact as the housing incident which played out in 2008 & 2009. The possible banking crash could prove horrific and the largest banks bailed out previously oddly enough, have the most at stake. We have the most to loose. Google recent bankrupt oil companies for a huge surprise in number and this is only the beginning. Why do you think banks are tightening loan requirements – they are scared. Thanks Mike for putting it out in a Weiss Report.

JimWednesday, January 27, 2016 at 12:50 am

CVX, XOM, OXY too big to fail? How about an “oil bailout”? Why should they have to pay for their dumb decisions when banks, brokerages, insurance companies, automakers, etc don’t? I thought bailouts saved the economy. TIC Jim

Chuck BurtonWednesday, January 27, 2016 at 1:57 pm

Oddly enough, companies involved in transporting, storing and processing oil are often doing very well because of the low price of the resource. I know of an ETF in that area which has seen it’s price drop like a rock, yet was able to raise it’s dividend to nearly 25% of the ETF price. I’m nearly ready to buy, as soon as I think oil has bottomed.

hawk5000Wednesday, January 27, 2016 at 3:17 am

I have a few friends who are finance managers at different auto dealerships 10 years ago they would get 1 person a month paying maxed out interest on a car loans , now that number represents about 40% of all sales theres bubbles out there everywhere if your willing to look for them and that’s the scary part.

S. R. KhanWednesday, January 27, 2016 at 3:42 am

Mike Larson would you have any data on the “overall” amount of non-performing loans, not just in the U.S. as it is not an isolated economy. If not Mike Larson anyone else has this information by any chance ? As there seems to be more than one definition what I mean by non-performing is the total value of the asset at time of drawing down the loan (not current market value) less what has been repaid. The balance amount would fall into the category of a non-performing loans. The second question is any idea how much have banks in general (not just the U.S.) shored up their capital with LLPs (Loan Loss Provisions). Banks hold oil debt as well having financed investment projects many that are in the red and investment worth well over $380 billion have been put on hold. All this does have a ripple effect on the economy and the banks.

olcayWednesday, January 27, 2016 at 6:24 am

What is your prediction for gold in 2016 thanks sir.

Steven SchollWednesday, January 27, 2016 at 12:07 pm

Good Morning;

This letter is in response to Ted F. He asks if a 250 GTO can be worth north of 30 million dollars. As a car that you would drive, no. However, these are very rare collectibles. These mega buck cars are never driven, not even to a car show. They are known as trailer queens because they are never driven farther than from the trailer to the garage.

As for insurance. These cars are not driven on the road, so no collision or liability insurance is needed. Your homeowner’s insurance will go through the roof when the insurance company finds out that you have a 30 million dollar car in one of your garages. But let’s be realistic, if you can afford the car, you can probably afford the loss if something terrible happens to it. Even as junk, that 250 GTO is still worth a small fortune, just for parts or to be rebuilt.

Mega buck cars are just like any other collectible. It’s price is based on supply and demand. If you are not a gear head, I can understand how these sale prices look insane.

Happy Motoring,

Steve Scholl

David FosterWednesday, January 27, 2016 at 11:43 am

Hi Mike, In your afternoon article you mention possible housing loan problems and the ETF KRE…..as a subscriber to your news letter will you be recommending ETF’s such as KRE and others in Option call/puts?
Thanks
Dave

Chuck BurtonWednesday, January 27, 2016 at 1:42 pm

Iran’s President Rouhani told Pope Francis that Iran shares with Western leaders their goal of defeating ISIS. Of course it does – ISIS follows an extreme version of Sunni Islam, and Iran is mostly a Shiite population. Shiites tend to follow a more liberal Islam which led to the bloom of learning in science and mathematics during the time when the West was wrapped up in the Middle Ages.